Work-Related Car Expenses 2020: Secrets Accountants Know

Photo: Dragana_Gordic

Did you know you can claim your work-related car expenses if you’re able to prove how much you covered for work? Using the system to your advantage can be a lucrative endeavour.

Yet, your attempt is doomed to failure if you’re not familiar with the ATO mileage deduction rules.

People had their reasons when they said knowledge is power.

Still in the dark as to how to claim your tax deduction? Does a barrage of questions pop out when you think about keeping your business mileage records?

If so, you’ve landed in the right place.

You’re about to uncover some tax-related secrets only accountants know. Read on and soon enough you’ll have a proven plan for claiming your work-related car expenses in 2020.

What Makes You Eligible for Claiming Work-Related Car Expenses?

You can claim car expenses from the ATO only if you use your own vehicle to perform your work-related duties. Still, not every work-related drive will qualify.

To separate the wheat from the chaff and make sure you’re super-clear on what you can claim, here’s a little checklist of tax-deductible drives.

You’re eligible for a tax deduction only if you use your car to:

  • Drive between two separate workplaces, such as when travelling from your first job to your second job.
  • Drive from a usual to an alternative workplace (that ISN’T a regular workplace). Then drive back to your usual workplace or home.
  • Attend work-related conferences or meetings.
  • Deliver items or pick up supplies.
  • Carry bulky tools or equipment (such as an extension ladder or cello) required for use at work.
  • Perform itinerant work.

Yet, if your travel is partly private and partly for work, you can claim only the business-related part.

car expenses chart
Screenshot from: Australian Government

Can I Claim a Vehicle Tax Deduction If I Use a Personal Vehicle for Business Purposes?

You can deduct the mileage you covered in the course of performing your job, as long as you own the car. This applies regardless of whether your car is owned, leased, or hired.

However, to claim a deduction, you’ll have to be able to offer proof of your car ownership.

This is dead simple. All you need to do is save your capital cost receipts. If you get audited by the ATO, they might ask you to show your financial contributions to:

  • the initial purchase of the car
  • loan payments
  • lease payments
  • hire-purchase agreements

If they find that you made no financial contributions, the ATO may deny your claim. There are exceptions to the rule, though. Your claim is legit if a family car has been given to you as a birthday present. Bear in mind, though, you can claim expenses only for a car for which you bore all expenses.

And one more mental note for you: If you’re using someone else’s car for work-related purposes, you can claim only direct costs you pay for (e.g., fuel).

Should I Use the Cents Per Kilometre or the Logbook Method?

This only depends on how often you use your car for business purposes.

If you cover up to 5,000 kilometres for work annually, you qualify for a cents per kilometre method. Inversely, if you exceed this limit, you’re much better off with the logbook method.

The two methods differ greatly when it comes both to the amount of work you need to put in and the amount you can claim.

The cents per kilometre method can yield you a maximum of $3400 worth of tax deductions. You get this number by multiplying the maximum number of kilometres (5000km) with the ATO cents per kilometre rate for 2019 (68 cents per kilometre).

The logbook method can help you exceed this deduction by far. It’s based on your actual expenses, so you get reimbursed for most of your car running costs such as fuel, registration, insurance, etc.

But there’s the uglier side of it, too. You need to keep a logbook for 12 weeks AND keep receipts for your actual expenses. You know what they say: All good things require some effort.

Can I Write Off Tax on a Car Payment?

Now, this is a common question among motorists looking for ways to cut down on their car expenses. Pity, it’s often left unaddressed.

Many businesses also want to know if they can write off their car payment. The answer is yes for the former and no for the latter.

Note that:

  • You CAN’T buy a car as a business expense, nor can you claim the principal on any money borrowed to buy it. You also can’t claim any improvement costs.
  • You CAN write off the amount of tax you pay for the car payment under your company name.

And wait until you hear this! The ATO issued the instant asset tax write-off that allows you to claim tax return on certain assets you buy for your business. As of 2 April, 2019, you can claim tax on assets that cost up to $30,000.

This applies only for small businesses that stretch out to a certain ROI, but more on that later. The idea behind this tax break is to lift the burden off small enterprises. Being able to get the write-off for large purchases immediately is a big deal for such companies.

Not waiting until the next fiscal year is a huge relief for those struggling to keep the cash flow positive.

“Any single asset purchased under $30,000 qualifies for the asset tax write-off. This means that if a business purchases multiple assets under $30,000, they should all qualify – even if the cumulative cost exceeds $30,000.”Finder.com.au

And yes, this asset can be a car. You can purchase a car under your business and claim taxes this financial year. Keep in mind you’re eligible if:

  • You purchase assets that don’t exceed the value of $30,000.
  • You use the asset for your business operations in the same fiscal year that you claim the deduction.
  • Your business’ turnover is within the brackets of $10 million and $50 million.

It’s insane, right? Well, it would be just as insane not to take advantage of this while the offer is still on the table.

How to Claim Your Work-Related Car Expenses in 2020?

Let us take a wild guess. Toiling away for your taxes is not something you’re crazy about regardless of tempting tax deductions.

You’d rather cut corners.

That’s why we’ve reached out to accounting specialists to learn how they do their taxes. They must know what they’re doing, right? There must be a shortcut to claiming your tax return that’s also legitimate.

It’s in your best interest to keep your records accurate and compliant with the ATO tax rules.

Luckily for you, there’s a simple solution for Australian taxpayers. All you need to do is find a decent ATO-compliant logbook app.

When searching the market for the best logbook app, shoot for an app that does the logging accurately. Outdated technology can be costing you thousands. Using apps that log mileage inaccurately can make you to miss out on large tax deductions.

How you'd use GOFAR for your logbook or business trip expensing

Thinking of using GOFAR for your logbook or business trip expensing? This will give you an idea of how it would work.Learn more at https://www.gofar.co/business-expensingGet yours at https://www.gofar.co/order

Posted by GOFAR on Tuesday, 23 January 2018

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Uncovering secrets is a thrill on its own. But when it comes to doing your tax return, uncovering secrets have practical implications in your day-to-day life.

Here, you get thousands of dollars back on your tax return. Plus you save time and sanity by letting an app do the record-keeping for you. Sounds decently practical.

Now that you’ve tapped into the wellspring of high-value tax information, it’s time to get started.

GOFAR is a slick piece of software that will help you keep accurate records of your business mileage, with little to no effort. Based on the bleeding edge technology, it ensures you a full record of work-related trips at tax time.

An OBD2 port device that comes with the GOFAR app tracks every trip and makes sure you maximise your tax return. It’s all you’ll ever need to log your business mileage.

Learn more on how to handle your work-related car expenses like a pro. Or grab a hold of your own logbook app and start making the most of your 2020 vehicle tax deduction.

Track Work Mileage With GOFAR

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